[Newspoetry] 4warded from Manni Brun

[William Gillespie]

IMF'S FOUR STEPS TO DAMNATION
---------------------------------------------
How crises, failures, and suffering finally drove a Presidential adviser
to the wrong side of the barricades

Gregory Palast Sunday April 29, 2001 The Observer

It was like a scene out of Le Carré: the brilliant agent comes in from
the cold and, in hours of debriefing, empties his memory of horrors
committed in the name of an ideology gone rotten.

But this was a far bigger catch than some used-up Cold War spy. The
former apparatchik was Joseph Stiglitz, ex-chief economist of the World
Bank. The new world economic order was his theory come to life.

He was in Washington for the big confab of the World Bank and
International Monetary Fund. But instead of chairing meetings of
ministers and central bankers, he was outside the police cordons. The
World Bank fired Stiglitz two years ago. He was not allowed a quiet
retirement: he was excommunicated purely for expressing mild dissent
from globalisation World Bank-style.

Here in Washington we conducted exclusive interviews with Stiglitz, for
The Observer and Newsnight, about the inside workings of the IMF, the
World Bank, and the bank's 51% owner, the US Treasury.

And here, from sources unnamable (not Stiglitz), we obtained a cache of
documents marked, 'confidential' and 'restricted'.

Stiglitz helped translate one, a 'country assistance strategy'. There's
an assistance strategy for every poorer nation, designed, says the World
Bank, after careful in-country investigation.

But according to insider Stiglitz, the Bank's 'investigation' involves
little more than close inspection of five-star hotels. It concludes with
a meeting with a begging finance minister, who is handed a
'restructuring agreement' pre-drafted for 'voluntary' signature.

Each nation's economy is analysed, says Stiglitz, then the Bank hands
every minister the same four-step programme.

Step One is privatisation. Stiglitz said that rather than objecting to
the sell-offs of state industries, some politicians - using the World
Bank's demands to silence local critics - happily flogged their
electricity and water companies. 'You could see their eyes widen' at the
possibility of commissions for shaving a few billion off the sale price.

And the US government knew it, charges Stiglitz, at least in the case of
the biggest privatisation of all, the 1995 Russian sell-off. 'The US
Treasury view was: "This was great, as we wanted Yeltsin re-elected. We
DON'T CARE if corrupt election." '

Stiglitz cannot simply be dismissed as a conspiracy nutter. The man was
inside the game - a member of Bill Clinton's cabinet, chairman of the
President's council of economic advisers.

Most sick-making for Stiglitz is that the US-backed oligarchs stripped
Russia's industrial assets, with the effect that national output was cut
nearly in half.

After privatisation, Step Two is capital market liberalisation. In
theory this allows investment capital to flow in and out. Unfortunately,
as in Indonesia and Brazil, the money often simply flows out.

Stiglitz calls this the 'hot money' cycle. Cash comes in for speculation
in real estate and currency, then flees at the first whiff of trouble. A
nation's reserves can drain in days.

And when that happens, to seduce speculators into returning a nation's
own capital funds, the IMF demands these nations raise interest rates to
30%, 50% and 80%.

'The result was predictable,' said Stiglitz. Higher interest rates
demolish property values, savage industrial production and drain
national treasuries.

At this point, according to Stiglitz, the IMF drags the gasping nation
to Step Three: market-based pricing - a fancy term for raising prices on
food, water and cooking gas. This leads, predictably, to
Step-Three-and-a-Half: what Stiglitz calls 'the IMF riot'.

The IMF riot is painfully predictable. When a nation is, 'down and out,
[the IMF] squeezes the last drop of blood out of them. They turn up the
heat until, finally, the whole cauldron blows up,' - as when the IMF
eliminated food and fuel subsidies for the poor in Indonesia in 1998.
Indonesia exploded into riots.

There are other examples - the Bolivian riots over water prices last
year and, this February, the riots in Ecuador over the rise in cooking
gas prices imposed by the World Bank. You'd almost believe the riot was
expected.

And it is. What Stiglitz did not know is that Newsnight obtained several
documents from inside the World Bank. In one, last year's Interim
Country Assistance Strategy for Ecuador, the Bank several times suggests
- with cold accuracy - that the plans could be expected to spark 'social
unrest'.

That's not surprising. The secret report notes that the plan to make the
US dollar Ecuador's currency has pushed 51% of the population below the
poverty line.

The IMF riots (and by riots I mean peaceful demonstrations dispersed by
bullets, tanks and tear gas) cause new flights of capital and government
bankruptcies This economic arson has its bright side - for foreigners,
who can then pick off remaining assets at fire sale prices.

A pattern emerges. There are lots of losers but the clear winners seem
to be the western banks and US Treasury.

Now we arrive at Step Four: free trade. This is free trade by the rules
of the World Trade Organisation and the World Bank, which Stiglitz
likens to the Opium Wars. 'That too was about "opening markets",' he
said. As in the nineteenth century, Europeans and Americans today are
kicking down barriers to sales in Asia, Latin American and Africa while
barricading our own markets against the Third World 's agriculture.

In the Opium Wars, the West used military blockades. Today, the World
Bank can order a financial blockade, which is just as effective and
sometimes just as deadly.

Stiglitz has two concerns about the IMF/World Bank plans. First, he
says, because the plans are devised in secrecy and driven by an
absolutist ideology, never open for discourse or dissent, they
'undermine democracy'. Second, they don't work. Under the guiding hand
of IMF structural 'assistance' Africa's income dropped by 23%.

Did any nation avoid this fate? Yes, said Stiglitz, Botswana. Their
trick? 'They told the IMF to go packing.' Stiglitz proposes radical land
reform: an attack on the 50% crop rents charged by the propertied
oligarchies worldwide.

Why didn't the World Bank and IMF follow his advice?

'If you challenge [land ownership], that would be a change in the power
of the elites. That's not high on their agenda.'

Ultimately, what drove him to put his job on the line was the failure of
the banks and US Treasury to change course when confronted with the
crises, failures, and suffering perpetrated by their four-step
monetarist mambo.

'It's a little like the Middle Ages,' says the economist, 'When the
patient died they would say well, we stopped the bloodletting too soon,
he still had a little blood in him.'

Maybe it's time to remove the bloodsuckers.

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